Author: Will Wainewright (London)

Mayfair allure remains strong for London funds

Mayfair’s position as the undisputed heartland of London’s hedge fund community was called into question last month by research suggesting more funds were considering bases in the wider West End of London. The shift would apparently cause the traditional perimeters of Oxford Street and Regent Street to become increasingly obsolete as funds looked further afield. As so often, however, the truth did not quite match the headlines.

Property sources have told HFMWeek that demand among hedge funds is still high for prime office space in Mayfair and St James’s. A rumoured recent £110($177)/square foot deal involving a German wealth manager shows rents are approaching historic highs – though still short of the rumoured £140($226)/square foot paid by Permal Group, the $20bn fund of hedge funds manager, for its lavish HQ overlooking St James’s Square in 2008.

Och-Ziff Capital Management, one of the world’s biggest hedge funds, was cited as an example in one article about funds “marching out of Mayfair,” but its move to Argyll Street was not driven by a desire to escape the area; indeed, employees only have to cross Regent Street to visit.

Soho-based funds GLC and Zebedee Capital Partners, in Broadwick Street and Great Pulteney…

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Author: Tony Griffiths (London)

Editor's letter: 16 May 2012

It felt like it had been building for weeks. The pressure cooker purred in January and February, squealed in March and April, and, this week, finally blew a gasket. For those who ever doubted it, charred eurozone is back on the menu.  

The immediate aftermath of Greece’s renewed political uncertainty and, to a lesser extent, the victory in the French presidential polls of socialist candidate Francois Hollande, was a slump in the global financial markets. The FTSE 100 is now at a 2012 low. The S&P 500 has, like the US in general, proved more resilient but isn’t faring much better.     
   
Hedge funds have generally had a good start to the year, but strong early performers like Henderson Global Absoulte Return and Odey European were flagging again in April.

A likely upshot is that counterparty risk will be back in the spotlight, heightened more immediately by a $2bn trading loss at JPMorgan. HFMWeek research has unearthed mixed messages on the likely impact on the US bank’s prime brokerage client base. The widening CDS spread told its own story.

In terms of strategy, the growing number of participants in the credit/distressed space are looking increasingly…

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Author: William Keunen

Comment: William Keunen

For hedge funds facing a rising tide of regulation it has never been more critical to be fully abreast of developments. In this article I will focus on three key areas – the The Alternative Investment Fund Managers Directive (AIFMD), Form PF and FATCA – that are challenging the industry, and recommend some of the ways administrators can help.

The AIFMD
Valuation: the directive requires that the manager demonstrate the fund’s assets have been properly valued. It imposes an obligation on the manager to have a written valuation policy that sets out the methodology for each type of asset held by the fund. The valuation can be performed by the manager or an external valuer. The policy must:

(a) set out the responsibility of each party involved in the valuation process including senior management of the manager and any external valuer; and

(b) include a description of the safeguards in place to ensure the independence of a valuation by the manager.

Today, there is still an element of uncertainty because many funds do not have formal or detailed valuation policies and a third party calculating the NAV is not considered an external valuer, as long as it does…

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Author: Will Wainewright (London)

Small names finding it tough to gain traction

Away from the big-name launches who, as our page four graphic shows, have been doing rather well raising assets this year, the outlook is very different. While start-ups whose founders have a good pedigree have fared strongly, sources have repeatedly emphasised to HFMWeek the difficulties encountered by funds more generally. It is a picture confirmed by this year’s Goldman Sachs investor survey.

Most tellingly, almost 70% of respondents surveyed by Goldman’s prime brokerage team, representing more than $1.3trn of invested hedge fund assets, said they had not allocated “day one” to a new hedge fund during 2011. A paltry 13% of investors had given initial backing to one fund, and with day-one allocators attracted to the big-name launches, the average hedge fund launch was unlikely to have seen a dollar of it.

Things seem to be getting more difficult for managers away from the top tier. Fifty four percent of Goldman’s respondents said they expected new allocations this year to go to managers with a track record of more than three years, a figure which stood at 45% last year. And for investors who require a minimum AuM to allocate, the level has increased…

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